They had no desire for their competitor to own any of their stock. In the US, Chapter 11 allows for a company to stay in business while restructuring its debt obligations. Edward Schwinn’s hope was that he would be allowed to make changes necessary to emerge from bankruptcy as a stronger company.
Trying to reduce costs, the company laid off many employees, including a handful of Schwinn relatives. Key employees also were jumping ship if they found another job. With all the financial constraints, Schwinn finally pulled the plug on the money losing Greenville plant in 1991. The early 1980s decision to not modernize the Chicago factory came back to haunt Schwinn. Meanwhile, Schwinn’s competitors were not sitting by idly.
The main value for a company wishing to purchase Schwinn would be the Schwinn name. The lawyer for the Trust played hardball and stated that the family wanted compensation for the name. The suppliers saw the writing on the wall and quit sending bikes to Schwinn. The Schwinn Family Trust recipients were irate over a cessation of payments. The closing of the Greenville factory combined with the globalization of the bicycle industry meant that Schwinn would never again be making bicycles in the USA. Some of Schwinn’s dealers saw the writing on the wall and they began to carry Trek and other bicycle brands.
Founded in 1974 in a Southern California garage, Mongoose has always been an aggressive brand with products that push the limits of what a rider can do. From the biggest hits on the mountain or in the park to the urban jungle, Mongoose is an authentic brand that produces durable products built for real riders. The story of Schwinn can be seen as a reflection the new business climate of the 1990s. Gordon Gekko famously said in the movie Wall Street, “Greed is good.” The vulnerability of Schwinn was on clear display in this new age of financial wheeling and dealing accompanied by outsourcing of bicycle production to Asia. Finally, Schwinn was in a corporate partnership that would last for many years.
However, he was rolling the dice by putting Schwinn in the hands of a bankruptcy judge. Making matters worse, these were not just ordinary suppliers. They were producers of strong competitive bicycle brands such as Giant. The Asian suppliers even talked about taking over Schwinn and assuming its debt, but the deals did not pan out. With growing financial pressures, the final payments to the family trust were made up until 1990. The family knew that a Schwinn bankruptcy could wipe out their payment for good.
The total Zell-Chilmark deal including the debt waiver by China Bicycles was valued at $61 million. China bicycles offered $2.5 million to the Family Trust and it was grudgingly accepted. After nearly 100 years of sweat, tears, and bicycle innovations, the family received a paltry sum. The bright side was that the deal would mean that the Schwinn family name would be kept alive adorning bicycles for many years to come. With deals flying in all different directions, China Bicycle Company finally hit on a solution.
The Chicago Schwinns were among the most bomb-resistant bikes ever built, and they were built with unique technology . With the exception of the Sports Tourer, Super Sport, and Superior, they are welded, not brazed. The head tubes look as if they were fillet brazed, but they weren’t. There are necked-down parts that fit into the top tube and down tube, like internal lugs. Bring in a team of qualified fitness equipment technicians to make the process easy.
For Trek, this strategy began to work and during 1990 and 1991. During that period, Trek moved from fourth to second rank in the bicycle industry. Some of the bankers began to send the loans to the workout department to see how much money they could recover from Schwinn. This was not only meant to put pressure on schwinn dealers Schwinn to come up with a reasonable financial workout plan, but also was to hedge their bets on a company financial failure. The pride of the Schwinn family in its outright ownership of the company had come back to bite them. Despite being deeply in debt, Schwinn took a hardline position against its creditors.
If I recall, it was what Schwinn called a “cantilever” frame, where the seat stays pass by the seat cluster and continue on in a graceful curve to join the bottom of the head tube. Older Schwinn “cruisers”, such as the Excelsior that was the inspiration of the first mountain bikes, used a straight lower top tube from the bottom of the head tube to the seat tube. By the mid-1970s, competition from lightweight and feature-rich imported bikes was making strong inroads in the budget-priced and beginners’ market. While Schwinn’s popular lines were far more durable than the budget bikes, they were also far heavier and more expensive, and parents were realizing that most of the budget bikes would outlast most kids’ interest in bicycling. In the late 1960s, the Varsity and Continental pioneered the use of auxiliary brake levers, which allowed the rider to rest hands on the straight, horizontal center section of the ram’s horn handlebars, yet still have braking control.
The company was joined iconic brands such as the English Raleigh and the French Motobecane. The high-quality American and European bicycle makers from the 1970s and 1980s all were impacted by the globalization of the bicycle market. The three major bicycles companies that would prove their mettle in adapting to the new business climate were Trek, Giant and Specialized.